A second operator in the Bakken was granted a flaring exemption today due to a pipeline that Oneok was unable to complete due to right-of-way constraints.
The North Dakota Industrial Commission voted unanimously to “stay consistent” and allow Oxy USA to avoid penalties due to its flared gas on wells affected by Oneok’s cancelled gas pipeline project on the Fort Berthold Indian Reservation. In May, the commission granted a similar request from XTO Energy. Oneok was forced to halt the proposed pipeline after it was unsuccessful in obtaining an easement from the Three Affiliated Tribes for a 1.8-mile section near Killdeer, despite Oneok’s offer to pay nearly $10 million a mile – 20 times the going rate.
“As opposed to a payment for use of the land,” Helms said, “they wanted a tariff on every mcf of gas that moved through that pipeline during the life of the pipeline, and that was just a no-go with the operators.”
Oneok’s plan B involved rerouting the pipeline across 4.8 miles of federal land but was again denied approval. It is now constructing a new gas plant in Dunn County off the reservation to handle the gas. Though Oxy asked to avoid flaring penalties on its affected wells in Dunn County until the third quarter of 2016 when Oneok plans to have its gas plant constructed, the commission only granted relief for six months, believing that further construction within the Bakken this summer may provide other means of gas capture for the operator. The exemption only applies to wells that were in production when Oxy became aware of the cancelled pipeline in February.
The bottleneck caused by the failed pipeline project also affects Marathon, Continental Resources, ConocoPhillips (doing business in North Dakota as Burlington Resources) and Newfield Exploration. The state’s Department of Mineral Resources Director Lynn Helms told the commission he expects to receive flaring exemption applications from these operators as well.
“It was a very significant pipeline,” Helms told reporters following the meeting. “It was going to carry 40 million cubic feet a day, and so as you carve that up that impacts a lot of folks.”
The gas being flared due to the cancellation of the project is approximately 12 percent of all flared gas, according to Helms. As of January 1, the state requires a 77 percent gas capture rate and the latest data available indicates the industry is in compliance at 82 percent. In January 2016, the rate is scheduled to increase to 85 percent.